Pick 1 Stock For 5 Years: Results

First off, sincere thanks to everyone who submitted a pick via the blog, our twitter page, or email. It was a great response as we received hundreds of replies and have been busy sorting through them. The question was simple: If you had to own only 1 stock for the next 5 years, what would it be? Since many of the hedge funds we track on the blog are centered around stockpicking, we thought it would be fun to see what readers had in mind for long-term picks of their own.

As you can imagine, we received the full gamut in terms of answers but definitely noticed a few themes in the responses. Firstly, when it comes to 'buy and hold,' blue chip stocks are the name of the game. By far and away, the largest amount of entries centered around well established blue chip companies that have a proven brand and often pay a dividend. Secondly, two sectors received the most votes and those were: technology and energy. Readers definitely see those two arenas as areas of long-term growth and sustainability it seems.

Without further ado, onto the results. We'd first like to toss out a few honorable mentions that received a lot of votes, but not quite enough to land in the top 10. Some of those stocks include: Cree (CREE), Exxon Mobil (XOM), Leucadia (LUK), Range Resources (RRC), Johnson & Johnson (JNJ), Monsanto (MON), Transocean (RIG), Berkshire Hathaway (BRK.B), FPL Group (FPL), and Verisk (VRSK).

And here are the TOP 10 PICKS, with the #1 pick being the stock that received the most entries:

10. A123 Systems (AONE)

9. BHP Billiton (BHP)

8. JPMorgan Chase (JPM)

7. Google (GOOG)

6. BYD Company (Hong Kong: 1211)

5. General Electric (GE)

4. Philip Morris International (PM)

3. Walmart (WMT)

2. Goldman Sachs (GS)

1. Apple (AAPL)


So there you have it, Apple easily had the most votes as many think this technology giant has become the next Microsoft (MSFT) in terms of dominance. Sticking with technology, there were also a lot of votes for Google (GOOG). The blue chip names that received a lot of entries as we referenced earlier were WMT, GE, and PM. It was also interesting to us to see heavy support for some recent IPO's in Verisk (VRSK) and A123 (AONE). Readers definitely think these freshly public companies have bright futures. Also, while energy was a strong theme with picks like RIG, XOM, we also saw strong voting for plays in the 'green' energy category like BYD and AONE. Lastly, the theme of financials was strong as many people decided that they wanted to own Goldman Sachs (GS) as they've emerged through the crisis as heavyweights, with votes also trickling in for JPM.

Overall, very interesting results and thanks again for participating! Hopefully in five years we'll be able to check back in on this post and see who had the magic crystal ball to pick the right stock. After all, the point of this exercise was stockpicking for the long-term. Who will win? We'll have to wait and see. In the mean time, make sure you check back with us for our constant coverage of hedge fund portfolios and the like.

Band of Analysts: Learn From Hedge Fund Analysts

Given the fact that many of our readers are hedge fund managers, analysts, traders and the like, we're always looking to share resources that are specific to this industry niche. At the same time, we also recognize that we have a large amount of readers who are passionate investors, employed in some other branch of finance, or are simply looking to break into the hedge fund industry. This resource is aimed directly at those readers. Here's your chance to learn from hedge fund analysts themselves in order to hone your understanding of fundamentals. It serves to bridge the gap between retail investing and the type of methodologies employed at many of the hedge funds we track here at Market Folly. Upon discovering this resource, we made it a priority to arrange a discount exclusively for our readers as the Band of Analysts team are Market Folly readers themselves. So, we are proud to offer you an exclusive 30% recurring discount to Band of Analysts with the code: MFolly.

Band of Analysts is a community of hedge fund analysts committed to sharing experience, knowledge, and most importantly, ideas. They give you access to the actual Excel financial models, Powerpoint presentations, and various other related materials regarding an actionable investment idea. Regardless of whether you're working in the hedgie world or not, this is an excellent resource. You can see an example of one of the Powerpoint presentations here. That lesson discusses event-driven investing with a particular focus on binary outcomes using CIT Group as an example. This is just one type of the many analytical resources that get posted on the site.

Undoubtedly, many of you are familiar with sites like SumZero or the Value Investor's Club. These communities are great tools to share your investment ideas, read others' picks and interact with each other. Given their exclusivity though, those sites are often reserved for industry professionals. Band of Analysts looks to break down that barrier by letting you learn from hedge fund analysts themselves. Their videos are literally as if you're looking over the shoulder of a hedge fund analyst as they explain their work. These serve as a great starting place to jump right into in-depth fundamental research. Secondly, they also offer many educational videos analyzing current situations. This is all on top of the discussion forums where community members can interact and really discuss what they're seeing in the markets. Their focus is on those of you looking to bridge the gap from retail to professional investor or from an associate in the financial world to an analyst at a hedge fund or major financial firm. We think their resource is an ideal fit for that portion of our reading audience and so that's why we wanted to share it with you.

In order to receive the exclusive 30% recurring discount, make sure you sign-up with the code: MFolly. We look forward to interacting with many of you there.

Fundamentals / My Quick Value Scan

One thing that's bothered is me is I've come across blogs that post up "Oh I ran my scan yesterday..." but they fail to tell us what the scan actually is, as if its some huge protected secret. So, thought I would go over one of the main scans I run to get a quick glance at possibly undervalued equities.

This is a quick fundamental scan I run on yahoo finance, just to keep up to date weekly on what equities are nearing tempting levels. This is a value based scan, but I am NOT a deep value investor. So, the various banks or retailers that come up in this scan I'll take a quick look at, but I rarely invest in or trade those names. You have to weed through the garbage, because more often than not, there's some garbage that shows up. I'll call this scan "QuickValue". This scan has provided me with past beauties such as Ensco drilling (ESV) and more. Let's get to it, here's what you want to run in your scan:

PE < 15 (<25 if you want to loosen up the restrictions)
Return on Equity > 20%
PEG ratio < 1 (< 0.5 for extremely undervalued companies)
Price to book < 2.5 (< 1.2 if you wish to be like Benjamin Graham)
CurrentRatio > 1.5
Price to sales < 5

A few additional categories you can add:
Strong dividend growth
Low debt to equity
EPS growth of 3.3% of more year over year for a 5 year period
Strong Insider Ownership
Strong Institutional/Hedge Fund Presence

Now, as you can see, you can tweak a whole bunch of different things within that scan (omit a few categories, add a few categories, etc). I run the loose scan first and then fiddle around a little bit. Please note that I do NOT find all my companies through this scan. Companies like Apple (AAPL) and some of the fertilizer plays Potash (POT) and Mosaic (MOS) would never show up on these scans, and yet I'm invested in them. This is just one of the starting places I look for ideas in terms of value. Remember, this is a quick, loose VALUE scan.

Typically, the main things I look for in my companies not necessarily found in this scan are operating margins between 15-20%, a return on equity greater than 15%, strong (accelerating) quarterly revenue growth on a year over year basis, strong (accelerating) quarterly earnings growth on a year over year basis, a PEG ratio of under 1, a price to sales of under 5, insider/institutional/hedge fund ownership.

This is just an idea of fundamental things to look at when you're starting your research on any stock. This is literally just the tip of the iceberg in terms of fundamentals. But, I've found it to be a good starting place to generate some ideas and find some value for the value side of the portfolio. Fiddle around with some of the constraints and see what you come up with. Anyone have any other favorite scans they use pretty often?